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China lays out official stance on trade talks with U.S.

Posted by on Jun 2, 2019 in Asia, Beijing, China, fedex, Government, Huawei, Policy, smartphone, Trade war, U.S. China trade war, U.S. government, United States | 0 comments

On Sunday, China released a comprehensive white paper to formalize its positions on trade negotiations with the U.S. The set of statements come as the trade war escalates and Beijing threatens to hit back with a retaliatory blacklist of U.S. firms. Here are some key takeaways from the press conference announcing the white paper:

U.S. ‘responsible’ for stalled trade talks

The “U.S. government bears responsibility” for setbacks in trade talks, chided the paper, adding that the U.S. has imposed additional tariffs on Chinese goods that impede economic cooperation between the two countries and globally.

While it’s “common” for both sides to propose “adjustments to the text and language” in ongoing negotiations, the U.S. administration “kept changing its demands” in the “previous more than ten rounds of negotiations,” the paper alleged.

On the other hand, reports of China backtracking on previous trade deals are mere “mudslinging,” Wang Shouwen, the Chinese vice minister of commerce and deputy China international trade representative, said as he led the Sunday presser.

China ready to fight if forced to

China does not want a trade war with the U.S, but it’s not afraid of one and will fight one if necessary, said the white paper.

Beijing’s position on trade talks has never changed — that cooperation serves the interests of both countries and conflict can only hurt both — according to the paper. CNBC’s Eunice Yoon pointed out that Beijing’s latest stance repeats previous statements made back in September.

Deals must be equal

Difference and frictions remain on the economic and trade fronts between the two countries, but China is willing to work with the U.S. to reach a “mutually beneficial and win-win agreement,” stated the paper. However, cooperation has to be based on principles and must not compromise China’s core interests.

“Nothing is agreed until everything is agreed,” Wang said.

He said one needs not “overinterpret” China’s soon-to-come entity list, adding that it mainly targets foreign companies that run against market rules and violate the spirit of contracts, cut off supplies to Chinese firms for uncommercial reasons, damage the legitimate rights of Chinese companies, or threaten China’s national security and public interests.

China respects IP rights

The paper also touched on issues that are at the center of the prolonged U.S.-China trade dispute, including China’s dealings with intellectual property rights. U.S. allegations of China over IP theft are “an unfounded fabrication,” said the white paper, adding that China has made great efforts in recent years to protect and enforce IP rights.

Wang claimed that China pays the U.S. a significant sum to license IP rights every year. Of the $35.6 billion it shelled out for IP fees in 2018, nearly a quarter went to the U.S.

Investments are mutually beneficial

The white paper claimed that bilateral investments between the two countries are mutually beneficial rather than undermining for U.S. interests when taken account of “trade in goods and services as well as two-way investment.”

The Chinese government also pushed back at claims that it exerts influence on businesses’ overseas investments.

“The government is not involved in companies’ business activities and does not ask them to make specific investments or acquisitions,” said Wang. “Even if we make such requests, companies won’t obey.”

In response to China’s probe into FedEx over Huawei packages that went stray, Wang assured that “foreign businesses are welcome to operate legally in China, but when they break rules, they have to cooperate with regulatory investigations. That’s indisputable.”

The Shenzhen-based smartphone and telecom giant has been hit hard by during the trade negotiations as the Trump administration orders U.S. businesses to sever ties with the Chinese firm.


Source: The Tech Crunch

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Tiger Global and Ant Financial lead $500M investment in China’s shared housing startup Danke

Posted by on Mar 1, 2019 in affordable housing, alibaba, Ant Financial, apartment, Asia, Baidu, Beijing, business intelligence, China, danke apartment, jack ma, LinkedIn, major, property, Real Estate, renting, Tiger Global Management, WeWork, Xi Jinping | 0 comments

A Chinese startup that’s taking a dorm-like approach to urban housing just raised $500 million as its valuation jumped over $2 billion. Danke Apartment, whose name means “eggshell” in Chinese, closed the Series C round led by returning investor Tiger Global Management and newcomer Ant Financial, Alibaba’s e-payment and financial affiliate controlled by Jack Ma.

Four years ago, Beijing-based Danke set out with a mission to provide more affordable housing for young Chinese working in large urban centers. It applies the coworking concept to housing by renting apartments that come renovated and fully furnished, a model not unlike that of WeWork’s WeLive. The idea is by slicing up a flat designed for a family of three to four — the more common type of urban housing in China — into smaller units, young professionals can afford to live in nicer neighborhoods as Danke takes care of hassles like housekeeping and maintenance. To date, the startup has set foot in ten major Chinese cities.

With the new funds, Danke plans to upgrade its data processing system that deals with rental transactions. Housing prices are set by AI-driven algorithms that take into account market forces such as locations rather than rely on the hunches of a real estate agent. The more data it gleans, the smarter the system becomes. That layout is the engine of the startup, which believes an internet platform play is a win-win for both homeowners and tenants because it provides greater transparency and efficiency while allowing the company to scale faster.

“We are focused on business intelligence from day one,” Danke’s angel investor and chairman Derek Shen told TechCrunch in an interview. Shen was the former president of LinkedIn China and was instrumental in helping the professional networking site enter the country. “By doing so we are eliminating the need to set up offline retail outlets and are able to speed up the decision-making process. What landlords normally care is who will be the first to rent out their property. The model is also copiable because it requires less manpower.”

“We’ve proven that the rental housing business can be decentralized and done online,” added Shen.

danke apartment

Photo: Danke Apartment via Weibo

Danke doesn’t just want to digitize the market it’s after. Half of the company’s core members have hailed from Nuomi, the local services startup that Shen founded and was sold to Baidu for $3.2 billion back in 2015. Having worked for a business of which mission was to let users explore and hire offline services from their connected devices, these executives developed a propensity to digitize all business aspects including Danke’s day-to-day operations, a scheme that will also take up some of the new funds. This will allow Danke to “boost operational efficiency and cut costs” as it “actively works with the government to stabilize rental prices in the housing market,” the company says.

The rest of the proceeds will go towards improving the quality of Danke’s apartment amenities and tenant experiences, a segment that Shen believes will see great revenue potential down the road, akin to how WeWork touts software services to enterprises. The money will also enable Danke, which currently zeroes in on office workers and recent college graduates, to explore the emerging housing market for blue-collar workers.

Other investors from the round include new backer Primavera Capital and existing investors CMC Capital, Gaorong Capital and Joy Capital.

China’s rental housing market has boomed in recent years as Beijing pledges to promote affordable apartments in a country where few have the money to buy property. As President Xi Jinping often stresses, “houses are for living in, not for speculation.” As such, investors and entrepreneurs have been piling into the rental flat market, but that fervor has also created unexpected risks.

One much-criticized byproduct is the development of so-called “rental loans.” It goes like this: Housing operators would obtain loans in tenants’ names from banks or other lending institutions allegedly by obscuring relevant details from contracts. So when a tenant signs an agreement that they think binds them to rents, they have in fact agreed to take on loans and their “rent” payments become monthly loan repayments.

Housing operators are keen to embrace such practices for the loans provide working capital for renovation and their pipeline of properties. On the other hand, the capital allows companies like Danke to lower deposits for cash-strapped young tenants. “There’s nothing wrong with the financial instrument itself,” suggested Shen. “The real issue is when the housing operator struggles to repay, so the key is to make sure the business is well-functioning.”

Danke alongside competitors Ziroom and 5I5J has drawn fire for not fully informing tenants when signing contracts. Shen said his company is actively working to increase transparency. “We will make it clear to customers that what they are signing are loans. As long as we give them enough notice, there should be little risk involved.”


Source: The Tech Crunch

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As shared kitchens heat up, a China-based startup, Panda Selected, nabs $50 million led by Tiger Global

Posted by on Feb 21, 2019 in Beijing, China, CloudKitchens, Hangzhou, Luckin Coffee, Panda Selected, Recent Funding, Restaurants, shanghai, shenzhen, Startups, TC, Tiger Global Management | 0 comments

A few weeks ago, we told you that former Uber CEO Travis Kalanick looks to be partnering with the former COO of the bike-sharing startup Ofo, Yanqi Zhang, to bring his new L.A.-based company, CloudKitchens, to China. Kalanick didn’t respond to our request for more information, but according to the South China Morning Post (SCMP), his plan is to provide local food businesses with real estate, facilities management, technology and marketing services.

He might want to move quickly. Kitchens that invite restaurants to share their space to focus on take-out orders is a concept that’s picking up momentum fast in China. And one company looks to have just assumed pole position in that race: Panda Selected, a Beijing-based shared-kitchen company that just raised $50 million in Series C funding led by Tiger Global Management, with participation from earlier backers DCM and Glenridge Capital. The round brings its total funding to $80 million.

Little wonder there’s a contest afoot. China’s food-delivery market is already worth $37 billion dollars, according to the SCMP, which says 256 million people in China used online food ordering services in 2016, and the number is expected to grow to 346 million this year.

And that’s still a little less than a quarter of the country’s population of 1.4 billion people.

Panda Selected is wasting little time in trying to reach them. While SCMP says that online delivery services already blanket 1,300 cities. Panda Selected, founded just three years ago, says it already operates 120 locations that cover China’s biggest centers, including Shanghai, Beijing, Shenzhen and Hangzhou. It claims to work with more than 800 domestic catering brands, including Luckin Coffee, Kungfu and TubeStation. The company also says that its kitchens are typically 5,000-square-feet in size and can accommodate up to 20 restaurants in each space.

With its new funding, it expects to double that number over the next eight months, too, its  founder, Haipeng Li, tells Bloomberg. That’s going to make it difficult to challenge, especially by any U.S.-based company, given overall relations between the two countries and the ever-changing regulatory environment in China.

Then again, this may be just the first inning. Stay tuned.


Source: The Tech Crunch

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China tells teachers to quit assigning homework through WeChat

Posted by on Feb 18, 2019 in Asia, Beijing, China, Department of Education, Education, homework, learning, netease, Software, Tencent, WeChat, yuanfudao | 0 comments

China’s education authorities are about to take some burden off parents with school-aged children. A proposal posted last week by the Department of Education in China’s eastern province of Zhejiang said teachers should be banned from using WeChat, QQ or other mobile apps to assign homework or ask parents to grade students’ assignments.

As mobile internet booms in China, phones have become an extension of daily activities, including school practices. Instead of announcing homework in class or handing out notices to students in person, teachers are now dumping assignments into WeChat groups designed to interact with parents. Many teachers are keen to exercise their power through these digital channels, asking parents to help students with problem sets and even grade their homework.

The regional call to action follows a set of national guidelines released by the Ministry of Education in October directing teachers and schools to take more responsibilities rather than shift the load onto parents. “Teachers should be accountable for their job, treat teaching seriously, correct homework with prudence and help students with care.”

Not all schools abuse digital platforms to such an extent. A Shenzhen-based parent told TechCrunch that her second-grader who attends a local public school still does much of her homework in written form and parents’ involvement is moderate.

“Different schools treat technology differently and I’m not opposed to the use of it. It’s helpful, for example, to use a digital device to learn English because much of the process involves audios and videos,” the parent said. “I think sometimes media are painting teachers and schools in such a negative light just to get attention.”

Other recommendations in the national notice include limiting the amount of online homework to reduce nearsightedness, which has become a source of concerns for parents and society at large.

The new directives also come as Beijing tries to rein in what and how private technology services are infiltrating students’ lives. In one far-reaching move, the government ordered video-game publishers to cap children’s playing time, sending shares of industry leaders Tencent and NetEase tumbling. More recently, the Ministry of Education asked schools and universities to audit apps used by teachers and students on campus in accordance with guidelines set by the regulator.

Despite the government’s intent to ease stress and unplug devices for students, education apps have flourished in China. Those that help students outperform their peers have done particularly well. Yuanfudao, a startup that offers live courses, exam prep and homework help, gained a $3 billion valuation in its latest $300 million funding round in December. Its rivals Zuoyebang and Yiqi Zuoye have similarly attracted big-name investors and sizable funds to help their young users get ahead.


Source: The Tech Crunch

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China continues 5G push despite economic slowdown and Huawei setbacks

Posted by on Jan 30, 2019 in 5g, Asia, Australia, Beijing, Canada, China, Government, Huawei, LTE, manufacturing, mobile technology, network technology, spy, telecommunications, Transportation, virtual reality, Wearables, wireless technology | 0 comments

China will fast-track the issuance of commercial licenses for 5G as part of a national plan to boost consumer spending, said a notice published this week by the National Development and Reform Commission. The move appears to be multifaceted, for 5G plays a key role in China’s bid to lead the global technology race and one of its biggest 5G champions, Huawei, has been facing troubles on a global scale.

In its statement, the economic regulator calls on local governments to support the promotion and showcase of services utilizing the super-fast network technology. Ultra-high definition TVs, virtual/augmented reality handsets and other futuristic products will be eligible for government subsidies, though the regulator didn’t outline the detailed criteria.

The acceleration of 5G licenses comes as Beijing copes with a weakening national economy, a move that will “drum up demand with upgraded technology experiences across devices, automotive and manufacturing leveraging 5G technology,” said Neil Shah, research director at Counterpoint Research, to TechCrunch. 5G is on course to generate 6.3 trillion yuan ($947 billion) worth of economic output and 8 million jobs for China by 2030, according to estimates from the China Academy of Information and Communications Technology.

Beijing has been gearing up to be the world leader in the next-generation network tech, pouring resources into 5G research and infrastructure. But it has been hit with a speed bump overseas as western countries grow increasingly wary of spy threat posed by Chinese 5G equipments. A souped-up domestic drive, therefore, could help neutralize some of the global setbacks faced by its 5G crown jewels like Huawei.

The U.S. and Australia have banned local firms from procuring equipment from Huawei, and Canada and the U.K. are currently reviewing whether to continue using 5G parts made by the Chinese telecom equipment giant. Meanwhile, Huawei is facing a list of criminal charges from the U.S. for stealing state secrets and its financial chief Meng is accused of bank fraud.

“Aaccelerating 5G licenses should indirectly help Huawei gain competitive edge for 5G considering it will be supplying solutions to the world’s largest mobile cellular market, China,” observes Counterpoint’s Shah. “This also gives Huawei an early platform to showcase its technology to the world and attract more global business.”

Huawei has continued with its 5G push despite being dogged by a string of global woes. Last week, the Shenzhen-based conglomerate unviled a 5G chipset for multiple commercial uses across smartphones, home and work. The chip, dubbed the Balong 5000, will be launching in February at a Barcelona tech trade show.


Source: The Tech Crunch

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Canada’s Telus says partner Huawei is ‘reliable’: reports

Posted by on Jan 21, 2019 in 3g, 5g, Ambassador, Asia, Australia, Beijing, Canada, China, Donald Trump, Huawei, Justin Trudeau, Meng Wanzhou, New Zealand, Policy, Ren Zhengfei, Security, spy, telecommunications, telus, the wall street journal, United Kingdom, United States, vancouver, White House, zte | 0 comments

The US-China tension over Huawei is leaving telecommunications companies around the world at a crossroad, but one spoke out last week. Telus, one of Canada’s largest phone companies showed support for its Chinese partner despite a global backlash against Huawei over cybersecurity threats.

“Clearly, Huawei remains a viable and reliable participant in the Canadian telecommunications space, bolstered by globally leading innovation, comprehensive security measures, and new software upgrades,” said an internal memo signed by a Telus executive that The Globe and Mail obtained.

The Vancouver-based firm is among a handful of Canadian companies that could potentially leverage the Shenzhen-based company to build out 5G systems, the technology that speeds up not just mobile connection but more crucially powers emerging fields like low-latency autonomous driving and 8K video streaming. TechCrunch has contacted Telus for comments and will update the article when more information becomes available.

The United States has long worried that China’s telecom equipment makers could be beholden to Beijing and thus pose espionage risks. As fears heighten, President Donald Trump is reportedly mulling a boycott of Huawei and ZTE this year, according to Reuters. The Wall Street Journal reported last week that US federal prosecutors may bring criminal charges against Huawei for stealing trade secrets.

Australia and New Zealand have both blocked local providers from using Huawei components. The United Kingdom has not officially banned Huawei but its authorities have come under pressure to take sides soon.

Canada, which is part of the Five Eyes intelligence-sharing network alongside Australia, New Zealand, the UK and the US, is still conducting a security review ahead of its 5G rollout but has been urged by neighboring US to steer clear of Huawei in building the next-gen tech.

China has hit back at spy claims against its tech crown jewel over the past months. Last week, its ambassador to Canada Lu Shaye warned that blocking the world’s largest telecom equipment maker may yield repercussions.

“I always have concerns that Canada may make the same decision as the US, Australia and New Zealand did. And I believe such decisions are not fair because their accusations are groundless,” Lu said at a press conference. “As for the consequences of banning Huawei from 5G network, I am not sure yet what kind of consequences will be, but I surely believe there will be consequences.”

Last week also saw Huawei chief executive officer Ren Zhengfei appear in a rare interview with international media. At the roundtable, he denied security charges against the firm he founded in 1987 and cautioned the exclusion of Chinese firms may delay plans in the US to deliver ultra-high-speed networks to rural populations — including to the rich.

“If Huawei is not involved in this, these districts may have to pay very high prices in order to enjoy that level of experience,” argued Ren. “Those countries may voluntarily approach Huawei and ask Huawei to sell them 5G products rather than banning Huawei from selling 5G systems.”

The Huawei controversy comes as the US and China are locked in a trade war that’s sending reverberations across countries that rely on the US for security protection and China for investment and increasingly skilled — not just cheap — labor.

Canada got caught between the feuding giants after it arrested Huawei’s chief financial officer Meng Wanzhou, who’s also Ren’s daughter, at the request of US authorities. The White House is now facing a deadline at the end of January to extradite Meng. Meanwhile, Canadian Prime Minister Justin Trudeau and Trump are urging Beijing to release two Canadian citizens who Beijing detained following Meng’s arrest.


Source: The Tech Crunch

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Tesla to recall 14,000 Model S cars in China over faulty Takata airbags

Posted by on Jan 18, 2019 in airbag, airbags, Asia, Automotive, automotive industry, Beijing, Cars, China, Ford, gigafactory, model, Model S, palo alto, Roadster, sedans, Tesla, Tesla Model S, Toyota, transport, United States | 0 comments

China’s top market regulator said on Friday that Tesla will recall a total of 14,123 imported Model S vehicles in the country over potentially deadly airbags.

The recall is part of an industry-wide crackdown on Takata-made front passenger airbags, which involves roughly 37 million vehicles including more mainstream brands such as Toyota and Ford, as noted by the United States Department of Transportation. These defective airbags use a propellant that might rupture the airbag and cause serious injuries, or even deaths.

Tesla has begun a worldwide recall of its sedans that use Takata airbags, the firm said on its Support blog. It noted that the airbags only become defective based on certain factors, such as age. The recall does not affect later Model S vehicles, Roadster, Model X, or its more affordable Model 3.

The China recall involves Model S cars manufactured between February 2014 to December 2016, shows a notice posted on the website of China’s State Administration for Market Regulation. TechCrunch has reached out to Tesla for comments and will update the article once more information is available.

The setback comes as Tesla is making a big push into the world’s largest auto market and tapping on Beijing’s effort to phase out fossil-fuel cars for China. The company recently reached an agreement with the Shanghai government to build its first Gigafactory outside the US, which will focus on making Model 3 cars for Chinese consumers. There is no target date for the factory to become fully operational yet.

Despite being an alluring market, China has been a major source of Tesla’s concerns over the past months due to escalating trade tensions and the rollback of government subsidies for green vehicles. Tesla responded by slashing its Model 3 price by 7.6 percent for China to neutralize heavy tariffs on imported cars.

The Palo Alto-based company previously recalled 8,898 Model S vehicles in China over corroding bolts, which it claimed at the time had not led to any accidents or injuries.


Source: The Tech Crunch

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New policy puts revenue squeeze on China’s payments giants

Posted by on Jan 17, 2019 in alibaba, alibaba group, Ant Financial, Asia, Bank, Banking, Beijing, China, E-Commerce, financial services, insurance, mobile payment, online payments, payment, payments, Tencent | 0 comments

The era that saw China’s mobile payments providers making handsome interest returns on client money has officially ended.

Starting this week, non-bank payments companies must place 100 percent of their customer deposit funds under centralized, interest-free accounts as Beijing moves to rein in financial risks. In the past, third-party payments firms were allowed to hold pre-paid sums from buyers for a short period of time before transferring the money to merchants. This layout allowed companies like Alibaba’s payments affiliate Ant Financial and Tencent to earn interest by depositing customer money into bank accounts.

Exactly how much money Ant and Tencent derived from these deposits is unclear. Both companies declined to comment on the policy’s revenue implications but said they have complied with the rules and finished transferring all customer reserve funds to a centralized clearing system.

Here are some numbers to help grasp the scale of the lucrative practice. The central bank gave a two-year window for all payments firms to complete the transition as it gradually raised the reserve funds ratio, which climbed to 85 percent in November. By then, total customer funds deposited by non-bank payments companies into central custodians hit 1.24 trillion yuan ($180 billion), while another estimated 260 billion yuan was yet to come under regulated control, shows data published by the People’s Bank of China.

Collectively, the giants account for more than 90 percent of China’s third-party mobile payments and 34 percent of all third-party, internet-based payments (which include both PC and mobile transactions), according to research firm Analysys.

While the regulatory control surely has measurable revenue implication on payments firms, some experts point to another adverse consequence. “Now that payments companies are no longer putting deposits into their [partnering] banks, they lose bargaining power with these banks that charge commissions for handling their mobile payments,” an employee from a major payments firm told TechCrunch on the condition of anonymity.

Tencent doesn’t break down how much it makes from payments but the unit has grown rapidly over the past years while its major income source — video games — took a hit last year. Meanwhile Ant Financial has been diversifying its business to go beyond financial services. It has earnestly marketed itself as a “technology” company by opening its proprietary technologies to a growing list of traditional institutions like banks and insurance companies. Reuters reported earlier that technology services will make up 65 percent of Ant’s revenue in about four years, up from an estimated 34 percent in 2017.


Source: The Tech Crunch

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WeChat is quietly ranking user behavior to play catch-up with Alibaba

Posted by on Jan 15, 2019 in alibaba, alibaba group, alipay, Ant Financial, Asia, Bank, Beijing, China, credit score, Government, Messenger, mobile payments, online lending, online payments, payments, power bank, Tencent, WeChat | 0 comments

Over one billion people leave behind trails of information on WeChat every day as they use the messenger to chat, read, shop, hail rides, rent umbrellas and run many other errands. And the Tencent app has quietly started using this type of signal to determine whether a user is worthy of perks such as deposit-free renting services.

The rating system, which the company calls the “WeChat Payments Score” in Chinese, soft-launched last November across eight cities and has been piloting on a small number of apps. Among them is the Tencent-backed power bank rental service Xiaodian, which waives deposits for users if their points hit a certain benchmark. It’s easy to imagine how the rewards mechanism can help nudge customers to try out WeChat’s panoply of in-house and third-party offerings down the road.

Exactly how WeChat calculates these points is unclear, but a test done by TechCrunch shows it factors in one’s shopping and contract-fulfilling records. We’ve reached out to Tencent for more details and will update the article when more information becomes available.

Alibaba’s affiliate Ant Financial — WeChat’s biggest contender in online payments — has been running a similar assessment engine called the “Sesame Credit” since 2015. Like WeChat’s, it measures several dimensions of user data including purchase behavior and capability to fulfil contracts. People with higher scores enjoy perks like deposit waivers when staying at a hotel, incentives that could keep customers in the house. Sesame points are available through Ant’s Alipay digital wallet that recently claimed to have crossed one billion users worldwide.

The WeChat payments score is reminiscent of Tencent’s short-lived credit-rating scheme. Indeed, digital footprints can also help China’s fledgeling financial system predict creditworthiness among millions of people without financial records. That’s why Beijing enlisted tech companies including Tencent and Ant in 2015 to come up with their own “social credit” scores under state-approved pilot projects.

Over time, regulators became wary of the mounting personal information used by online lending companies and moved to assert greater control over the whole credit-rating matter. In early 2018, it changed tack to crack down on private efforts — including a Tencent-run trial. Beijing subsequently set up Baihang Credit, the only market-based personal credit agency approved by China’s central bank. The government holds a 36 percent stake in Baihang. Ant, Tencnet and several other private firms also got to be part of the initiative, though they play complementary roles and hold 8 percent shares each.

While most countries use credit rating mainly as a financial credibility indicator, China has taken things a few steps further. By 2020, China aims to enrol everyone in a national database that incorporates not only financial but also social and moral history, a program that has raised concerns about privacy and surveillance.


Source: The Tech Crunch

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Winter is ending: China to restart game approvals

Posted by on Dec 21, 2018 in Asia, Beijing, China, Entertainment, game publisher, games publisher, Messenger, mobile game, netease, Policy, TC, Tencent, WeChat | 0 comments

As 2018 draws to a close, China’s gaming industry — which has been beaten by a nine-month-long freeze in license approvals — woke up to exhilarating news as officials announced that they have started to review new titles again.

The much-coveted game licenses are essential for developers to legally monetize their work in China. “We’ve finished reviewing the first batch of games,” said Feng Shixin, a senior official from the propaganda department of the Chinese Communist Party, at an industry symposium on Friday. He added that the ideology watchdog will assign licenses at the soonest though there is a huge number of applications sitting in the pipeline.

Shares of Tencent, the country’s largest games publisher, jump 4 percent on Friday while its smaller competitor NetEase is up 1 percent.

China’s regulatory bodies for games stopped approving new titles since March as they underwent a major reshuffle that would eventually place the State Administration of Press and Publication under direct control of the propaganda organ. The shakeup is meant to give the central government more scrutiny over the billion-dollar market.

For one, regulators are looking to clamp down on illegal games that contains pornography, gambling, violence and content deemed inappropriate by Beijing, including titles that rewrite the history, according to Feng. In March, Tencent’s blockbuster mobile game Honor of Kings came under fire by the Communist Party’s official paper for misrepresenting certain historical Chinese figures.

Secondly, China is calling game developers to have “a stronger sense of social responsibility”, especially when it comes to protecting minors from addiction and illegal content. Beijing went as far as blaming video games for causing bad eyesight in children. In response, Tencent and NetEase among other major publishers have placed a time limit on underage players.

Regulators have also ordered studios to improve game quality and encouraged them to expand overseas. Local titles could be an engine to “promote Chinese culture, propagate Chinese values and showcase Chinese tastes” as they go global, said Feng.

The long halt in game approvals has taken a toll on the world’s largest gaming market. Chinese games are on way to generate $40 billion in revenues in 2018, according to market researcher Newzoo. However, the massive industry saw its slowest growth over the last ten years as it grew 5.4 percent year-over-year during the first half of 2018, according to a report by Beijing-based research firm GPC and China’s official gaming association CNG.

The world’s largest game publisher Tencent — also the developer behind China’s largest messenger WeChat — for instance, could not cash in on popular titles. The giant saw gaming revenues slip by four percent during the third quarter. To offset the pressure in its consumer-facing gaming business, Tencent went through a major reorganization in October to put more focus on enterprise services.

Tencent said during its Q3 earnings call that it had 15 games with monetization approval in its pipeline, which means that gaming revenues may get back on track when those games attain the desired licenses.

“This is clearly very encouraging news for China’s gaming industry,” Tencent said in a statement on Friday. “As the review and approval process for games resumes, we are confident that Tencent will be producing more compliant and higher-quality cultural work for society and the public.”

Smaller players may also have a chance to race ahead in the revived market. “The size of the gaming company does not matter. It matters how fast the company can be adapting to the new set of rules and guidelines,” said Ilya Gutov, business development director at APPTUTTi, a company that helps overseas games enter China.

“Having said so, larger companies have more resources to work out the compliance. However, they have more internal process to go through — they are not as flexible as small companies — so it’s really [a question of] how fast people can react to the new approval process.”


Source: The Tech Crunch

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